Production Possibilities Frontier

Question 1

four factors

Answer 1

land, labor, capital, and management

Question 2

efficiency

Answer 2

• the process of using all four factors to their utmost capabilities
• how well you use production factors

Question 3

production factors

Answer 3

• land: physical and virtual spaces
• labor: workers and their work
• capital: means of production - resources used to make products
• management: people in charge who innovate or take risks

Question 4

opportunity cost

Answer 4

• opportunity = what you choose

- cost = what you lose

Question 5

note

Answer 5

• the owner of a small business (management)
• paper clips
• aaron hires someone to work the front desk so he can focus on bicycle repairs
• the production of “Product A” can increase without a decrease in the production of “Product B”
• inside the curved line of the graph (not efficient)
• the opportunity cost is in producing fewer safety pins
• allocation of fewer resources to product A
• on the curved line (100% efficiency)
• risk-taking (not example of capital)
• production is limited by availability of resources (opportunity cost)
• the scarcity of resources
• the production of weaponry would decrease